George Soros’s fascist economics part 2

In December 2011 Obama addressed the Democrats in Osawatomie where he amused these cultists by savaging trickle-down economics while heaping fulsome praise on Roosevelt’s policies: the same policies that kept the American economy in depression until WWII forced Roosevelt to change course. (Compare Australia’s record during the Great Depression with that of Roovelt’s).

Obama — the man who was praised by a corrupt media and sycophantic leftists masquerading as journalists as an outstanding intellect — didn’t know there is no such thing as trickle-down economics. The so-called trickle-down theory of prosperity is a canard that Samuel Rosenman, a Roosevelt speechwriter, concocted to malign Republicans and free markets.

The ignorance of history and economics that Obama displayed in his Osawatomie speech is truly staggering and exposed him as a thorough-going historical ignoramus with a fifth rate intellect who is totally lacking in intellectual curiosity. But this travesty of history that Obama mindlessly parrots is exactly what George Soros believes. It is this and nothing else that explains why he stands four-square behind the ignorant reactionary that occupies the White House.

As someone with a fascist view of the economy, George Soros neither knows nor cares that economics concerns itself with human action and in dealing with human action economics is dealing with complex phenomena the nature of which makes it totally unsuitable for the methods of the physical sciences. This means that economic theory, no matter how complicated, is deduced from a handful of postulates. To attack it on these grounds is to fall prey to extreme positivism. Economics can, however, be supported empirically.

Economic theories use long chains of complex reasoning which, like theories from the physical sciences, have been developed to explain the real world and not to define. A singular and permanent condition of the real world is scarcity and scarcity is why economics exists. Therefore the role of economics is to explain human action in a world ruled by scarcity and confronted by infinite wants. By now it should be painfully obvious that Soros cannot distinguish between the scientific and the scientistic.

His main thrust against economics is that it is based on the assumption that markets bring supply and demand into balance thus securing the best allocation of resources. He follows up by asserting that the assumptions do not apply to the real world because the assumptions of perfect competition, on which he claims economics depends, are not sustainable. This response alone reveals the appalling extent of his economic illiteracy.

Economics does not assume that the unhampered market tends to allocate factors to their most valued uses — it knows it does. But note the qualifier tends. In the real world countervailing forces ensure that these tendencies cannot be fulfilled. One of the most potent of these forces is entrepreneurship.

Soros’ assertion that economics rests on the theory of perfection is sheer baloney. This theory does not and never has underpinned economics. He would know that if had any real knowledge of economic theory or the history of economic thought. In fact, the theory was not fully completed until 1921 when Frank Knight finished refining it, even though its origins go much further back. (Georg Stigler, Perfect Competition, Historically contemplated in Microeconomics: Selected Readings, W. W. Norton & Inc., 1975, pp. 167-87).

Hayek wrote that “the theory of perfect competition… has little claim to be called ‘competition’. (Hayek, Individualism and Economic Order, Gateway Editions, 1977, p. 92). He was too generous. Perfect competition is not competition at all: it is in fact an impossible state of affairs. Hayek, along with others, fully understood that perfect competition was no competition at all. In fact, “‘perfect’ competition means indeed the absence of all competitive activities”. (Ibid 96).

The Austrians fully understood the futility of the perfectly competitive approach because they recognised the notion of ‘imperfect markets’ as a fallacy. Markets exist because perfect knowledge cannot exist. In short, markets are a substitute for perfect knowledge. This is something the neoclassical school has failed to grasp. It was this failure to recognise the market as a process and not a datum combined with its desire to give competition a formal definition and structure that led to the theory of perfect competition. If George Soros had really done his homework he would know that the much maligned Austrian school had demolished the theory decades ago.

The Austrians stress the fact that the market is a dynamic, spontaneous process. By spontaneous, they mean that it is not the product of any conscious design; that it is an extraordinary complex coordinating process. As Hayek pointed out it is impossible for any agency to collect, let alone organise, the sum total of the market’s knowledge. Not just because of the sheer size of the task but also because a crucial part of the knowledge that the market continuously creates, processes, coordinates and distributes is both fleeting and subjective. This crucial knowledge cannot exist in a centrally planned economy and the same, von Mises explained, goes for factor prices.

Regardless of what George Soros evidently thinks, competent economists do not treat supply and demand as given in the market place other than for illustrative purposes, nor do they ignore the role of expectations. Austrian thinking on these matters made a significant, and yet to be generally recognised, contribution to the nature and role of expectations (L. M. Lachman, Capital, expectations and the Market Process, Sheed Andrews and McMeel, Inc., 1977). Austrians continually draw attention to the fact that the sole source of all economic activity is human action and that demand and supply are ultimately shaped by individual expectations and valuations.

Soros made the ridiculous claim that economics could not say how prices are determined without the concept of equilibrium. This is a clear case of putting the cart before the horse. Prices are determined by the supply of a good and the demand for its services. The market clears where the two intersect. Supply and demand are in turn determined by the participants’ value scales which include their anticipations. Therefore it is price theory that leads us to equilibrium, not vice versa. This was followed by the equally ridiculous assertion that the “absence of equilibrium” means markets cannot allocate to the margin (optimum allocation).

He simply does not understand that if the market has achieved optimum allocation it has, ipso facto, ceased to exist for as long as the optimum situation persists. Because only the unhampered market can allocate resources to where they are most valued, it follows that those states with the freest markets would have the most efficient allocation of factors as measured in terms of productivity and returns. It would appear that Soros basically agrees with all of this. As he said:

There is a powerful case for the free market mechanism, but it is not that markets are perfect; it is that in a world dominated by imperfect understanding markets provide an efficient feedback mechanism for evaluating the results of one’s decisions and correcting mistakes.

Exactly. He then accused economics of creating a world where all the opportunities and preferences facing market participants are independent of each other. There is a grain of truth in this accusation when levelled at the neoclassical school that only pays lip service to economic actors. However, even it recognises that equilibrium does not mean that the participants and their preferences, etc., have been isolated, only that their expectations and plans have been brought into consistency with each other.

Soros finally revealed the source of his ignorance when he admitted that his experience of money markets led him to his present views. (I knew it couldn’t have been serious study). This apparent revelation leads him to merely parrot the old cry that financial markets are inherently unstable, leading to breakdowns and depressions. And that this instability led to the evolution of central banks. Yet, according to him, free market “ideologues” (how lefties love that word) argue that it was faulty regulations and not markets that were really responsible.

(I cannot entirely fault Soros for holding this view when I consider that Australian economists like P. D Jonson, Peter Smith, Steve Kates, Des Moore, Sinclair Davidson hold the opinion that “boom and bust are part of the natural order of capitalism” even though they never present any evidence to support their dogmatic attitude).

The truth of the matter is that markets are basically stable. What is not stable is monetary policy. And it is faulty monetary policies that destabilise economies and bring about financial crises. When the classical gold1 standard reigned supreme financial markets never witnessed the kind of prolonged financial gyrations that we are experiencing. These wild fluctuations are basically caused by constant changes, and anticipated changes, in money supplies, price levels and exchange rates.

Furthermore, nineteenth century depressions were caused when banks seriously deviated from the gold standard by artificially lowering interest rates and then expanded the money supply to meet the increased demand for loans. When the inevitable gold drain set in the banks were forced to deflate, triggering a depression. The theory explaining this process was laid down by Henry Thornton2 and then adopted by the Currency School. The Austrians refined the theory and integrated it into capital theory.

(Unfortunately the Austrian view has so far been successfully spiked by Australia’s free market economists, some of whom have adopted Steve Kates’3 false classical theory of the trade cycle and Catallaxy gets it wrong again on the classical economists on the trade cycle).

Another charge that George Soros levels against free market “ideology” is that it “does not recognise the need for a world order.” If by “world order” he means world government, then he is absolutely correct — and probably very lonely. On the other hand, if he simply means an absence of disorder and the supremacy of the rule of law then his accusation is nonsensical and malevolent.

He finalised his article with a call for us to become more like social democrats. Perhaps he should take note that social democrat policies — meaning interventionist policies — have left the Euro zone with an average unemployment rate of about 11 per cent. And while he is pondering the distribution of other people’s income, though never his own, he might give a thought to the gross disparities of income that are caused by unemployment brought about by the interventionist policies that he promotes.

George Soros is a very successful currency speculator, but he is no theoretician or deep thinker nor is he a democrat. He makes much of his commitment to democratic values. Yet Soros spent close to $15,000,000 to help get McCain-Feingold passed. (Fortunately most of the bill has been overturned). The effect of this bill would have been to restrict political speech in defiance of the First Amendment, which Democrats are now trying to gut.

Once the McCain-Feingold measure passed this paragon of virtue and the defender of the little people immediately set about circumventing the new law by financing a political network of fanatical leftwing groups who wage constant war against free market advocates while promoting fascist solutions to economic problems that their policies created. (The only difference between the fascist and the Marxist is the colour of their shirts). And this man had the nerve to piously assert that America needed “To dramatically reduce the role of big special-interest money in American politics.”

George Soros and his network of ideologically driven goons are full of it — and it is not the only thing they are full of

* * * * *

1Strictly speaking, the classical gold standard was really a quasi-gold standard. Under a 100 per cent gold standard the total amount of demand deposits and notes would be fully backed by gold. Although Peel’s 1844 banking Act was based on the currency principle of only issuing notes against gold (with the exception of a 14 million pound fiduciary issue) no such restraint was placed on demand deposits. This lack of foresight led to a number of financial crises.

2Henry Thornton, An Enquiry into the Nature and Effects of Paper Credit on Great Britain, 1802, pp. 185-91, 258- 67, 287-95. Few economists know that the so-called boom-bust phenomenon is not a product industrialisation or capitalism.

3Steve Kates is an Associate Professor of Economics Royal Melbourne Institute of Technology.

Correction: I had originally stated that Steve Kates was fellow at the Institute of Public Affairs. I have since learnt that this is not the case.

Arnold made a great point about Soros using his money to undermine American democracy. I think the reason why he has been so successful is because he used his money to fund a vast network of activists instead of a couple of think tanks. I would never have thought of this unless Gerry had pointed it out. I now think this is the major reason why Australia’s right-wing have been such bloody failures.

Thought I’d follow eddy and visit Catallaxy. There was a great leangthy piece by that wingnut Milne that Sinclair Davidson posted followed by another post by him on corporal punishment in schools, then another one about football scores. There was another Sinclair Davidson post where he went ga ga over something Judith sloan wrote about Stiglitz. And that was it!

It appears I made an honest mistake. Steve Kates is not a fellow of the institute of public affairs. Why John Humphreys, who goes by the moniker ESS, considers this a dreadful disgrace beats me. Then again, being a malignant liar he assumes that others are just as mentally diseased as he is.

Perhaps he is still suffering the aftershock of having me destroy his shabby little paper promoting a destructive carbon tax. The very same tax that all his little mates at Catallaxy and the institute of public affairs are now forever walloping.

Soros is not the only billionaire in America funding left-wing networks. What I don’t understand is why those Australians with money who fund the Centre for Independent Studies and the Institute of Public Affairs dont take a lesson from America’s fat cat socialists and do likewise.

John Humphreys nasty comment left me seething. What a cowardly, sleazy piece of work. Gerry made an innocent and absolutely harmless mistake, which he corrected, about Steve Kates being a fellow at the Institute of Public Affairs and Humphreys comes wriggling out of the woodwork to accuse Gerry of being a nasty liar. Gerry was right to kick the stuffing out of this lying jerk.

But let us all see the hilarious side of Humphreys’ behaviour. Unable to fault anything in Gerry’s articles Humphreys’ reverts to schoolyard bullying. If Humphreys was really concerned about the truth he would demand that Steve Kates explain why he is telling people that he has read the classical economists on the trade cycle when Gerry proved conclusively that he has not.

He would also demand that Sinclair Davidson correct his historical and economic howlers on the Great Depression.

Just finished reading Moran’s post on the carbon tax and renewable energy. Gerry’s articles are far better. Unlike Moran he explained why renewables don’t work. I also think that Moran has a quite a nerve. Some years ago there were some nasty exchanges regarding Moran and the carbon tax. It turned out that although Moran opposed the carbon tax and renewable energy he had been intimidated into not criticising Humphreys’ rotten paper. I realise now that this is why Moran stayed completely silent.

I am still trying to remember the name of the site. Pretty sure it will come to me.

So if what Sarah says is accurate, Alan Moran sat on his bum and said nothing while Humphreys went out promoting a carbon and then abused Gerry for exposing his rubbish. And now Moran is making out that he had always led the attack against the carbon tax. What kind of people are they?

This thing with Alan Moran, Sinclair Davidson, John Humphreys and the carbon tax is getting funnier and funnier. Davidson’s response to its repeal was to declare “Good riddance”. He then attacked John Humphreys with this statement,

“In my view, carbon tax proponents treated people with contempt. While telling us that the costs of their proposals would be low, and that a better future beckoned, they vilified anyone who dared question their vision.”

I stopped laughing when I realised he probably did not mean Humphreys at all. I then laughed all the more at the irony of it.

Sarah – the term is “lying liar who lies” and no, I’m not going to call Kates that because (a) it’s not true and (b) the only lying liar who lies around here is Wacko Jacko – who has a long track record of lying and being a liar. A traitor too.

You are lying again, Mr. John Humphreys. Steve Kates did lie about having read the classical economists on the trade cycle and Gerry proved it. Gerry blew Sinclair Davidson and Julie Novak out of the water on Australia in the Great Depression. Not one of them had the guts to challenge what he wrote. Gerry exposed Sinclair Davidson as useless on economic history when he nailed him on the gold standard.

The only lying wacko around here is you, Humphreys. You cannot fault gerry’s articles so like the diseased liar that you are you come crawling over here to smear the man.

This is really funny. Gerry wrote a number of times about that event over the years and pointed out its importance. Well Gerry must have been right all along if Kates now agrees with him. Now for the funny bit. Even though Gerry had been writing about this depression years before Kates ever did both Sinclair Davidson and Humphreys ran around telling people to ignore what Gerry writes. According to this malicious pair nothing he writes has any value.

Considering their awful behaviour, I am willing to bet my super that none of these creeps ever offered Gerry right of reply. I also bet that not one of these backstabbers offered to meet with him or even sent him a submission for publication in Brookesnews. Even John Quiggin had the guts to do that.

John Wacko Humphreys represents all that is rotten with our right-wing.

I don’t know about actually lying but Sarah is right in that Kates did not read the classical economists and I think Steve Kates very poor response to Gerry’s article confirms it. Gerry did read the material and Steve Kates knows it. It is now very clear in my mind that Kates is now misleading people. I think the whole episode is a damning indictment of the right wing’s dishonesty.

I don’t know what it is with John Humphreys, but his behaviour on this site exposes him as a very dishonest and unpleasant piece of work.

John Humphreys is incredibly stupid and ignorant. Gerry actually did John Quiggin over for his anti-market opinions and he savaged his Keynesian views. John Quiggin asked for right of reply and Gerry gave it to him. Nobody on the right does this. Just ask the backstabbing Sinclair Davidson, Chris Berg or Graham Young. So what does the right’s village idiot say? By giving the leftwing John Quiggin the opportunity to defend himself Gerry made himself an enemy “of the free market”.

If gerry’s views on the great depression and the classical economists are wacko, Mr. Humphreys, why don’t Davidson and Kates say so? Why are they now pretending that Gerry’s posts don’t exist? Tell us Mr Wacko, what are Davidson and Kates afraid of?

Regardless of John Humphreys’ childish attempts at creating mischief on this site two solid facts stand out.

Fact number one. Gerry Jackson demolished Steve Kates and this is why Kates’ friends have circled the wagons. That they did so is evidence enough that they are afraid of an honest debate.

Fact number two. Gerry Jackson’s post on Australia and the Great Depression put Sinclair Davidson and Julie Novak to shame. There is absolutely no comparison between Gerry’s article and their paper. Gerry’s article is tight, deeply researched and might even have broken new ground. In comparison Davidson and Novak’s paper is embarrassingly superficial and leads nowhere.

Regrettably I have to agree with Nick. People like Steve Kates and Sinclair Davidson are not interested in serious debates. Whether it is their egos or what I cannot say. But their pretence that they have not been successfully challenged is proof enough for me that what Gerry calls the free market commentariat in this country is not to be trusted.

John Humphreys is obviously emailing from a mental hospital because you have to be truly demented to write that Gerry is an enemy of the free market. Gerry has been more ferocious in his defence of free markets than anyone on the gutless right. It is intellectual cowards like Steve Kates, Sinclair Davidson and Julie Novak who refuse to defend what they write and not Gerry. They are the ones who run away. This lot are so spineless they make ordinary cowards look good.

It was Gerry who proved how utterly wrong Kates is on the classical economists and the trade cycle. It was Gerry who showed where Davidson and Novak went wrong on Australia and the Great Depression. It was Gerry who argued that booms and busts are not part of the free market. It is Humphreys mates who argue otherwise. It was Gerry who pointed out how their mistakes aid the left.

And now Wacko Humphreys, the right’s champion wingnut, is insanely arguing that Gerry is the enemy of the market while those phonies at Catallaxy and the Institute of Public Affairs give the left the ammunition to attack the free market cause.

Let me repeat myself—again, Steve Kates lied about reading the classical economists on the trade cycle and everyone here knows it. And that includes you, Humphreys. Steve Kates has to lie because he has not got the guts to man up to what he did. And Sinclair Davidson is every bit as bad.

This Humphreys character is a tiresome little twit. If Sinclair Davidson and Steve Kates had any integrity between them they would do the manly thing and step into the ring with Gerry and debate his articles. Instead they stay silent while the pathetic John Humphreys comes over here in a miserable attempt to diminish Gerry. Any doubts anyone had about Gerry’s articles must surely have been swept away by the right’s wretched behaviour and Humphreys shameless attempts at schoolyard bullying.

Frodo is spot on regarding Steve Kates and Sinclair Davidson. They could end these exchanges by simply explaining why Gerry’s posts are wrong. They don’t mind attacking other people so why are they avoding Gerry? I believe their refusal to challenge Gerry’s conclusions is proof that they are not as dumb as John Humphreys.

I think Humphreys last comment let the cat out of the bag. What he really said is that only members of the right and those to whom they grant permission have a right to comment on free market economics. So anyone who questions their expertise gets labelled a “traitor”. I also think this also supports Nick’s line of reasoning.

According to another comment, I cannot quite remember where it was right now, the right gives the impression that there are only about six or so free market proponents in the whole country. John Humphreys has now told us why. This explains Humphreys hatred of Gerry. Gerry has been supplying superior arguments in favour of the free market and the right don’t like it.

A great point, Biggles. I remember when Andrew Bolt was on Radio 3MTR, before it shut down. There were times when I thought they were broadcasting from the Institute of Public Affairs. Bolt would have Davidson on then he would have Moran on followed by another IPA drone and so on. If I had not known better I too would have believed they were the only free market proponents in the country. Wherever you look it is always the same people. The Taxpayers’ Alliance is another example.

Gerry Jackson is the best defender of the free market in the country and Australia’s only austrian. He’s not scared to take on the left. None of Humphrys pals at catallaxy or the IPA had the guts to go for Qiggin.

According to Greg a lot of people, including the Institute of Public Affairs, got a copy of Gerry’s post on steve Kates and the classical economists and their real theory of the of the trade cycle and they all stayed silent, except for that idiot Graham Young. They must now know that Kates is talking nonsense and they don’t care. These are not honest people.

Graham Young of Online Opinion is another example of the right’s dishonesty. Didn’t Greg tell us that Young told him that Gerry was a liar who hadn’t read the classical economists and that his article was too badly written to be published.

That lot at Catallaxy have a queer sense of humour. Click on “Why we do this?”http://catallaxyfiles.com/why-do-we-do-this and you get, “Because it is dangerous to have unchallenged consensus opinions”. Talk about bloody rich. This lot have formed their own “consensus” and don’t your dare challenge it.

Just for fun I did a Sarah at Graham Young’s Online Opinion and this is what he had to say, “opinions should be addressed, not suppressed”. This is from the guy who called Gerry a liar and then lied about his work. As Sarah said, “Talk about bloody rich”.http://www.onlineopinion.com.au/display.asp?page=about